Recent Posts

“I cannot be disillusioned because I no longer have any illusions
about Europe,” muttered Euro Group President Jean-Claude
Juncker last week after the horse trading over Greece’s bailout
had failed once again.

But he wasn’t the only one who lost his illusions.

“There are better alternatives to the bailout policies of
Chancellor Merkel,” declares the man who’ll run against her in
2013; alternatives that “protect taxpayers and don’t only benefit
the banks.”

After 40 years in the CDU, Merkel’s own party, that man, Stephan
Werhahn left it earlier this year in protest over her bailout
policies and joined the Free Voters (Freie Wähler).

In 2008, they’d decided to get into the Bavarian parliament and
won 11.2% of the seats. Out of nowhere. Now they’re going for the
federal elections in 2013.

And Werhahn—grandson of Konrad Adenauer, the legendary first
Chancellor of the Federal Republic and one of the founders of the
CDU—heads their list.

In the interview, he reviles the violations of the
Maastricht Treaty, the founding document of the EU. One of its
fundamental principles is that each country is responsible for
its own debts and that no country can be held liable for the
debts of other countries.

That principle, he says, was first broken with Greece’s initial
bailout in 2010. The preliminary bailout fund, the €480-billion
EFSF, was “the next violation.” The third violation was the
permanent bailout fund, the €700-billion ESM, which can be
leveraged “so that the liabilities for Germany and German
taxpayers will be greater still.”

The German Constitutional Court, in its review of the ESM,
mandated two safeguards—a maximum liability for Germany of €190
billion and parliamentary approval before each disbursement. But
that limit, he says, “is being leveraged by ECB President Mario
Draghi” with his promise to buy “unlimited” amounts of debt as
long as crisis countries submit to reform and austerity
requirements. When the ECB buys debt, Germany is liable for 27%
of any losses, blowing the lid off the Court-stipulated limit,
and “without approval by Parliament.” These ECB policies as well
as Germany’s Target-2 balances at the ECB of more than €700
billion “obscure the magnitude of the bailout financing.”

The government’s emphasis that aid is paid only if reform
requirements are met might not work, he says, as it’s trying “to
make something out of the southern European countries that
they’re not.” Now there’s unrest in Europe: in the North,
citizens don’t want to pay into a “bottomless barrel”; in the
South, citizens, who’re suffering under austerity pressures, say
that the only ones getting bailed out are “rich tax dodgers and
investors who bought that government debt.”

What about the warning by financial experts that stopping the
bailouts would produce enormous turbulence? “Exaggerated and pure
banking lobbyism,” Werhahn retorts.

Granted, many private and public investors would suffer losses.
And the fact that there’s no procedure for the bankruptcy of a
country would be a problem. But Greece and possibly Spain are
“broke.” They can’t restore their competitiveness while tied to
the euro. Not even the entire second bailout package will be
enough, he says; and ever more money will have to flow “to keep
these countries in the Eurozone.”

Instead, the EU should carry out an orderly bankruptcy of these
countries. Then it can step in with “a sort of a Marshall plan”
to fund a fresh start. Devaluation will help them raise their
exports and reduce imports. After they get their house in order,
they can rejoin the Eurozone. But if they can’t become
competitive, they won’t be “suitable for the monetary union.”
Otherwise, Werhahn says, “The euro will blow up Europe, instead
of bringing it together.”

Wait.... Many European politicians nurture the idea that the euro
is more than a currency, that it’s an “icon of unity and peace.”
Indeed, but the Free Voters are against
“over-elevating” the euro to a “romantic symbol.” He warned: “We
have a lot to lose if the euro becomes soft.”

And he wants more democracy. The Free Voters are proponents of
referendums at the federal level on important issues—however
unlikely that may be in Germany. For a referendum to work there
needs to be a “fair discussion,” he says, and the questions can’t
be manipulative. It will force the political world to clarify
alternatives and encourage the population to get informed. He
lamented the current resignation among citizens who are seeing
complex problems and large amounts, but are not even being asked
about them—because in Europe, “crucial democratic legitimacy is
lacking.”

After Moody’s downgraded France, the next major sovereign will
suffer the same fate. The UK has a phenomenal 436% of GDP in
foreign debt, which is not considered a problem because the
country holds “high-value assets.” Alas, they include €489
billion in Greek, Irish, Portuguese, Italian, Spanish, and French
debt. Read.... Who’s the Next Downgrade Domino?…The UK?